While we're already just about 3 weeks into the new year I figured it was as good a time as any to give you all an early look at how the residential real estate market in Missoula turned out. As you'll see in the charts below Missoula has seen continued recovery, which is great. There are some other mixed signals coming out now and some challenges ahead, I'll touch on those in a bit.
First off, how did Missoula do in 2013? The quick answer, pretty darn good. Missoula's residential market saw it's sales figures climb back up over 1000 homes reported sold for the first time since 2007. Additionally we saw a slight increase in both the median and average sales price. This is good on a few accounts, first it shows that current homeowners have accumulated some increased value due to market increases. Secondly since the rise wasn't very sharp ($5500 in median price and just about $2000 in average price) that suggests that the market increase will not have pushed too many buyers out of buying affordable homes.
Here's how our volume looked going back to 2007, which was our peak market.
As you can see 2013 marks our 3rd year in a row with an increase in the volume of sales. One might ask, why is that? There are many reasons but I personally saw a few major contributing factors. First off interest rates hit the floor and started to climb after that. In the spring of 2013 mortgage rates were still in the upper 3% range, now they're hanging out around 4.5% and projected to get over 5% at some point this year. Buyers took advantage of this and make quick moves. Secondly, notice how 2009 kind of stands out as just a bit abnormal compared to 2008, 2010, and 2011? The reason why can partially be attributed to the first time home buyer tax credit. This incentive saved the market from an even bigger fall off (in my opinion) and it put many first time buyers into a new home. That credit (which was in place for most all of 2009 and half of 2010) required the buyers to stay in the house for a minimum of 3 years if they didn't want to pay back that $8000. 2012 and 2013 has marked that 3 year anniversary for these home buyers, and many got into the market this year to upgrade their housing options. They recognized some small gains and built some equity and are now ready for that next "move up" home.
Enough on volume for now, so lets look at the market values. Here's another chart that puts both the median and average together. Please note the range on the y-axis is from $150,000 to $250,000. I did that so you can see better movement in market values than if it went from $0 to $250,000.
In 2013 our median sales price in Missoula was $215,000 while our average was $238,664. Quick refresher, the median represents the dead center number if you lined up all 1185 sales from 2013 in the order of highest to lowest. Meanwhile the average adds up the total amount of sales dollars and divides by 1185. Personally I like to report median because it's a "real" number and in cases of big numbers like these the average price tends to get stretched thanks to a few very high sales prices.
Next up, supply! I've posted in this blog many times absorption rates, which represent the amount of supply currently listed for sale in a given area. I've got two charts here plus a third that combines the two. All are broken down by neighborhoods/areas that MOR has used for prior reporting. A few quick tips as you read this. The absorption rate is calculated by the number of currently listed houses divided by the number of sold homes over a span of time. These charts have a 30 day look back and a 6 month look back. That rate represents supply. The general rule of thumb is that a "normal" amount of supply ranges from 3 to 9 months with 6 months being the ideal equilibrium. Anything LESS than 3 months supply would be a seller's market (lack of supply) anything OVER 3 months would be a buyers market (too much supply). In the combined chart I put small red dashes over the range of what a "normal" market should fall in.
You'll notice that I stacked the first two so they're ascending from highest to lowest, the third keeps the ascending order from the 6 month look back and places the current 30 day numbers over them.
So what do we see here? The 6 month look back is no massive surprise to many of us that have been working in this market for quite some time. Just about every market averaged out to have fairly good supply, some flirted with being sellers markets over the long run, which is impressive. What's more interesting is the areas in the 30 day snapshot which is heavily more reflective of the current market. We see that some areas such as the downtown and north side area and the Rattlesnake have seen a lot more listings come up but not enough buyers, East Missoula as well to some extent. Most other areas activities mirror their 6 month marks.
The 30 day survey covers the span of 12/18/13 to 1/18/14. Maybe the slowest part of our market, historically. So with some of these areas that are way too high with supply, don't freak out just yet. Lets see how the rest of the winter shakes out. For the downtown, north side, and Rattlesnake areas the last 6 months suggests those should smooth out.
2013 was a great year on many marks, it was a great year for interest rates meaning buyer power was boosted up. The lack of supply meant that sellers dealt with stronger offers, quicker market times, and bigger net proceeds. Tight supply did lead to some headaches though, some buyers missed out on getting into homes thanks to hyper-competitive bidding. In a few cases some buyers just quit looking entirely due to frustration of being out bid all the time.
One thing to keep in mind though is that Missoula is still under it's peak numbers. The median sales price is still just about 1% less than it was at it's peak, the average is about 3% less than it's peak, and sales volume is still nearly 5% under our best year. This means that homeowners who have dutifully been in the same home since before 2007 have still not seen their full market value recover yet.
Looking ahead to 2014 the national projections are for more growth. In Missoula that would be incredibly impressive as it would probably push our volume and our home values into new record highs. On accounts of sales volume, in my opinion, that's all good. However in terms of home values record high numbers means lower affordability for new entry buyers. MOR's most recent housing report shows that nearly half of Missoula rents - rapidly raising home values won't help cure that. Additionally interest rates are predicted to keep rising. That's going to pinch buyers top-end prices and affect monthly mortgage payments. That could help keep a cap on market values skyrocketing. Banks are also relaxing a bit of their tight standards, we're seeing some newer programs and grant funds that are designed to help people buy homes, have better down payments, and avoid mortgage insurance payments.
2014 will be an interesting year, I'm looking forward to what it brings!
(all statistical data was retrived through the Missoula Organization of REALTORS(R) Muliple Listing Service)